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Telus has a history of rewarding shareholders with dividend growth, according to Yield Hog panelist Tony Demarin of BCV Asset Management.

SHAUN BEST/Shaun Best/Reuters

Telus Corp. posted a 9-per-cent drop in profit on sliding revenue and notched down its financial forecast for the year as the recession squeezed wireless and other services.

The country's second largest phone company said it has accelerated cost-cutting, including laying off several hundred employees. Telus said it has cut 1,500 jobs this year.

The restructuring is now expected to cost the carrier $150-million this year, up from its earlier forecast of $125-million.

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"The second quarter results continue to reflect the impacts of the recession on our western and nationally-based businesses," Darren Entwistle, the president and chief executive officer, said in a news release. Restructuring efforts helped mitigate some of the effects, he added.

The troubled economy caused many wireless customers to use their phones more conservatively and travel less. Average revenue per user declined nearly 7 per cent to $58.61, even as wireless data revenue jumped 37 per cent.

Telus said it added 111,000 new wireless customers in the second quarter, more than double its rival Bell Canada , but the growth rate was 37 per cent less than a year earlier.

The company lost about 4 per cent of its land line phone accounts and added significantly fewer Internet customers in the quarter than a year earlier.

Despite market weakness, the Vancouver-based company increased capital spending in the quarter by 28 per cent, to $557-million, as it prepares to launch an advanced wireless network in the coming months and as it upgrades its land line network to carry high-definition television. The new TV service, which is called IPTV and is delivered over phone lines, added 17,000 accounts in the quarter, bringing the customer base to 115,000, Telus said.

Boosting capital spending in a downturn is not best for maximizing short-term cash flow, but it will benefit the company longer-term, Robert McFarlane, the chief financial officer, said in an interview.

"It is opportune if you want to position a firm to be able to take advantage of an economic recovery. At a time when many firms are cutting back capital expenditures, if you are making prudent investment, then you are going to have an advantage in the market place when the economy recovers."

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Telus is upgrading its land line network with plans to eventually offer IPTV in all urban areas. The new offering will enable the company to sell a full bundle of phone, data and video services to compete with rivals, principally Shaw Communications Inc. , the Calgary-based cable operator.

Telus began offering satellite TV service last quarter, through a resale arrangement with Bell Canada, which operates the country's largest satellite service, known as Bell TV. That product will be targeted mainly at rural markets once IPTV is fully deployed in cities, Mr. McFarlane said.

For the three months ended June 30, Telus reported revenue of $2.38-billion, down nearly 1 per cent from $2.40-billion a year earlier. Profit fell to $244-million, or 77 cents a share, from $268-million, or 83 cents per share.

For the full year, Telus said it now expects revenue between $9.65-billion and $9.8-billion, down from a range of between $9.7-billion and $9.9-billion. Share profit is now expected to be between $3.35 and $3.55, compared with a previous range of $3.35 to $3.65.

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